Housing affordability worries shaping retirement plans

A new survey indicates public support may be growing for Labor’s plans to reform negative gearing rules, even among property investors, as Australians grow increasingly wary of how worsening housing affordability will hurt their children.

The findings of the survey, launched at the Conference of Major Superannuation Funds 2018 in Brisbane on Friday, March 16, show that 35 per cent of 250 property investors surveyed would support reforms to negative gearing. The level of support from property investors for negative gearing reforms was even higher – 45 per cent – among those with children.

Among those respondents who did not own an investment property, 55 per cent said they would support changes to negative gearing.

The report, Home Truths: Negative gearing and retirement research 2018, is based on family interviews and an online public poll of 649 people, including 250 who owned a negatively geared investment property. The survey was conducted from late February to early March 2018. It was commissioned by the Australian Institute of Superannuation Trustees and conducted by Essential Media.

AIST chief executive Eva Scheerlinck said the survey confirmed that housing affordability was a significant concern for most Australians, including those heading into retirement.

“The long-held assumption that the home is a safety net for retirees is becoming increasingly dubious, as a growing proportion of older people are being forced to rent or use their super to reduce their mortgage in retirement,” Scheerlinck said.

She argued it was time for policymakers to re-examine the role of negative gearing and capital gains tax concessions and modify these measures.

Scheerlinck said negative gearing had been shown to fuel house price increases and to direct government tax expenditure into unproductive assets.

Retirees in debt

Broadly, the survey results reflected a widespread concern among participants about housing affordability and economic security in retirement. Four out of five of those surveyed were concerned that rising housing prices are locking young people out of the property market.

Among the property investors included in the survey, 95 per cent said security in retirement was an important factor in their decision to purchase an investment property. Minimising the amount of tax they pay was a motivating factor for 74 per cent of investors.

The survey also revealed roughly one-third of those who negatively gear a property expect to carry more than $100,000 of debt into retirement, compared with 8 per cent of those without an investment property, and 11 per cent of those with a non-geared investment property.

Essential Media head of research Dr Rebecca Huntley said people’s fears about not having enough to retire on were driving property investment.

“The conversations in the qualitative stage [of the research] with parents who negatively gear show just how much they trust that their investment properties will support them in old age,” Huntley said. “Yet, in order to invest they are moving into semi-retirement and retirement with debts.”

Huntley warned this is a risky strategy for many retirees.

“As a result, the children don’t believe there will be much left down the track for the next generation to inherit,” Huntley said.

Key findings

79 per cent of all survey respondents said they were concerned that rising house prices are locking young people out of the market.

95 per cent of property investors said their primary motivation for owning an investment property was to fund a comfortable retirement.

79 per cent of property investors with children say it is important to have an asset to pass down to them.

One-third of property investors surveyed have three or more properties.

55 per cent of non-property investors support changes to negative gearing, even if it meant prices might fall slightly. This compares with 35 per cent of those who own an investment property supporting changes.

Among all property investors, 52 per cent believe that an investment property is a better way to save for retirement than superannuation. However, of those without an investment property (a group more reflective of the wider Australian population), there is a more favourable view of superannuation – just 35 per cent believe investment properties are superior to superannuation. Among the interviews conducted with those using negative gearing, there was a near-uniform view that property is a lower-risk and-higher yield investment than superannuation.

47 per cent of property investors expect to enter retirement with debt.

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